Fears Telstra could exert control over NBN

By Stuart Corner

11 June 2013 — 3:00am

The national broadband network was supposed to create a level playing field, giving all service providers equal access to connected households, but there are fears that Telstra could still exert bottleneck control over access to customers, pushing up the cost of services.

The NBN is being constructed with 121 points of interconnect (PoIs). Any company that wants to serve NBN customers, even in niche or regional markets, must deliver its traffic to all 121 PoIs and have equipment installed in those PoIs: a significant investment. Alternatively, it can use the services of an intermediary provider that has made this investment.

NBN: Major cable cut.

Telecommunications analyst Paul Budde said: ''Only two or three wholesale/retail operators can afford to build out national services on top of the NBN. Narrowing that down even further, among these two or three, Telstra is by far the most dominant player. And it is evident that the cash-rich company can easily outcompete others.''

His concerns have been echoed by others in the industry.

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NBN Co proposed only 14 PoIs, but after a review the ACCC recommended increasing the number to 121, a recommendation adopted by the government.

The ACCC is now conducting a statutory review - although no significant change in the number of PoIs is expected.

In a submission to that review, service provider HarbourIT reinforced Mr Budde's view.

''It is impossible to make a go of [providing services over the NBN] in regional and remote areas under current arrangements, as backhaul imposes a major cost disadvantage relative to the large, vertically integrated ISPs with their own backhaul infrastructure,'' HarbourIT said.

However, there are several large service providers such as AAPT, Nextgen Networks and Optus offering NBN access services to smaller service providers.

Nextgen made a big play for this market when it announced its NBN Connect service in mid-2011 but owner Leighton Contractors has sold Nextgen to the Ontario Teachers Pension Plan (the sale is yet to close) and industry sources have said they believe Nextgen's commitment to providing NBN access is being wound back. Nextgen was unavailable to comment.

AAPT CEO David Yuile said he believed AAPT could offer ISPs a competitive NBN access service. ''We have seen a lot of interest from new retail providers looking to enter the market. What we do is package up a service that includes NBN access and connection to the PoI. They just want a national service and we can do that for them.''

However, Mr Yuile said there were some PoIs that it would be uneconomical for AAPT to reach.

''For some of the very remote PoIs we would probably have to buy from Telstra. We think there is no real competition there.''